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Netflix's Stock Spikes, But Will the Company Even Exist In 2016?

Written by: Rocco Pendola12/04/12 - 3:10 PM EST

Tickers in this article:
NFLX DIS

NEW YORK ( TheStreet) -- Netflix (NFLX) illustrates the irrationality of the stock market.

Remember last year when the stock rode on a magic carpet to -- what was it? -- $304 a share. And then it crashed. Twice. (It's now at around $84.)

Pre-implosion. During the implosion. Post-implosion. Nothing changes. Investors react to Netflix news announcements like they're drunk. Or in the middle of a coke binge with a 1980s big-hair band. Any reason to party. They take it and drive it like they stole it for a couple hours, maybe a couple of sessions, until buyers bail and suckers are left holding the bag, waiting for their next hit.

The news: Netflix and Disney (DIS) cut a major deal that gives Netflix access to some key content immediately and in 2013 as well as a lot of premium content in 2016. And the stock is up more than 10% today.

 In what the two companies call a separate deal, Netflix receives access to Disney classic movies, such as Alice in Wonderland and Dumbo.

What does it mean? This should make you somewhat bullish. Not bullish enough to bid Netflix's stock up by double-digits, but bullish nevertheless.

Kids TV continues as one of Netflix's strengths. Some analysts blame Netflix, which airs reruns of key Nickelodeon shows, for Viacom's (VIAB) ratings woes. Up until this deal, Netflix didn't have many key Disney classics; in fact, it ran some pretty bad knock-offs in lieu of the real thing. So this is a big deal for Netflix.

What does it mean? Don't know. Need some examples of what we should expect this content to be. In any event, it's likely not as big as the classics or the other key part of the pact ...

 Netflix becomes "the exclusive U.S. television subscription service for first-run live-action and animated feature films from The Walt Disney Studios," beginning with 2016 releases.

What does it mean? In and of itself, this is major news.

Starz has the Disney movie deal through 2015. Come 2016, Netflix gets first crack to air movies roughly six to seven months after they leave the big screen. This has never happened before with Netflix -- it lands an exclusive deal for first-run material, beating out traditional outlets such as Starz and Time Warner's (TWX) HBO.

But consider this within the context of Netflix.

Since early 2011, I have warned about Netflix's debt load. It pays a ton of money for content -- as of its last quarterly report , the company reports about $5 billion in off-balance sheet obligations, including roughly $2 billion due within a year.